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PETITIONER: STATE OF GUJARAT ETC.

       Vs.

RESPONDENT: HOTEL RATRANI THROUGH ITS PROPRIETORSHRI KANJI VISHWRAM PATE

DATE OF JUDGMENT:       10/12/1996

BENCH: K. RAMASWAMY, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:                             WITH      CIVIL APPEAL NOS.4514-15/84 AND 132-33/86                          O R D E R      The main  appeal  by  special  leave  arises  from  the judgment and  order of  the High  Court of  Gujarat, made on March 1/4,  1985 in Special Civil Application No.4459/84 and batch. The  other appeals  relate to  the  decision  of  the Bombay High  Court in  Ramesh Waman Roke & Ors. vs. State of Maharashtra [AIR  1984 Bom.345].  The Gujarat High Court has followed the  decision of  the Bombay High Court. In all the cases, the facts are not in dispute.      The respective  legislatures  brought  Section  6-A  in Bombay and the Gujarat Entertainment Tax Act, 1977 providing for levy  and collection  of tax  on entertainment  by Video Cassette Recorder  or Player  on Television or Videoscope in any place  of entertainment  or omnibus  etc. at  the  rates specified therein.  The latter  Act came  into force  w.e.f. June 14,  1984. The  Government made  Rules by name, Gujarat Cinema (Regulation  & Exhibition by Video) Rules, 1984 9 for short, the  "Rules"). The  Rules have come into force on the same  date.   The  respondents   filed  the  writ  petitions challenging the  constitutionality  of  Section  6-A,  Rules 13(1)  and  19(ii)  of  the  Rules.  The  High  Court  while upholding the  constitutionality of  the Act  and the  Rules held that  the gross  collection of the entertainment tax on the  Video   Recorder  or  Video  Player  on  Television  or Videoscope is arbitrary and violative of Article 14. It also held that  the Rules are ultra vires. Thus, these appeals by special leave.      In Venkateshwara  Theater  vs.  State  of  A.P.  &  Ors [(1993)   3    SCC   677],   this   Court   considered   the constitutionality of  Sections 4,  4-A and  5  of  the  A.P. Entertainment  Tax   Act,  1939   providing  for   levy  and collection of  entertainment tax  on the gross collection in Cinema  theater.   It  was   held  in   paragraph  16   that entertainment tax that would be collected over and above the average occupancy  rate would  constitute the  profit of the proprietor. In the circumstances, it cannot be said that the adoption of the system of consolidated levy in Section 4(1), as amended  by Act  24 of 1984, alters the nature of tax and

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it ceases to be a tax on entertainment.      In paragraph  17, on the gross collections, it was held thus:      "It has  been urged that since both      the  modes  of  levy  of  tax  were      prevalent prior to the enactment of      Act 24  of 1984,  an option  should      have been  given to  the proprietor      of  a   cinema  theatre  to  choose      between either of the two modes and      that under  the impugned provisions      the choice is confined to two modes      of assessment under the same system      of consolidated  levy based  on the      gross collection capacity per show,      one   on   the   basis   of   gross      collection  capacity   power   show      under Section 4(1) and other on the      basis of  gross collection capacity      per show for a prescribed number of      shows per  week under Section 5. We      find   no    substance   in    this      contention. Once  it is  held  that      tax  on   entertainment  could   be      levied by  either of the two modes,      viz., per  payment for admission or      gross collection capacity per show,      it is for the legislature to decide      the particular  mode  or  modes  of      levy to  be adopted  and whether  a      choice should  be available  to the      proprietor of the cinema theatre in      this regard.  The legislature  does      not transgress  the limits  of  its      legislative power  conferred on its      under Entry  62 of  List II  if  it      decides that  consolidated levy  on      the  basis   of  gross   collection      capacity per show shall be the only      mode   for    levy   of    tax   on      entertainments."      In paragraph 29 and 30, it was held thus:      "29. In  the instant  case, we find      that the legislature has prescribed      different   rates    of   tax    by      classifying theaters into different      classes,  namely,  air-conditioned,      air-cooled,  ordinary  (other  than      air-conditioned  and   air-cooled),      permanent  and  semi-permanent  and      touring and temporary. The theaters      have further  been  categorised  on      the basis  of the type of the local      area in  which they are situate. It      cannot, therefore,  be  said  there      has been  no attempt on the part of      the legislature   to  classify  the      cinema   theatres    taking    into      consideration  the  differentiating      circumstances for  the  purpose  of      imposition of tax. The grievance of      the   appellants    is   that   the      classification is not perfect. What      they went is that there should have      been further classification amongst

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    the theatres  falling in  the  same      class on  the basis of the location      of the  theatre in each local area.      We  do   not  think   that  such  a      contention is well founded.      30. In  relation to cinema theatres      it can  be said that the attendance      in  the   various  cinema  theatres      within a  local area  would not  be      uniform and would depend on factors      which may  vary from  time to time.      But his  does not  mean that cinema      theatres in  a particular  category      of local  area will  always be at a      disadvantage   so    as    to    be      prejudicially affected by a uniform      rate as compared to cinema theatres      having a  better  location  in  the      same local  area. It is, therefore,      not   possible    to   accept   the      contention   that    the   impugned      provisions  are  violative  of  the      right to  equality guaranteed under      Article 14  of the  Constitution on      the basis  that unequals  are being      treated equally."      Thus this Court had upheld the power of the Legislature to levy  gross collections on the entertainment tax. Section 6-A reads as under:      "6-A(1) There  shall be  levied and      paid to the State Government, a tax      on  an   entertainment   by   video      cassette recorded or video cassette      player on  television or videoscope      calculated at  the following rates,      namely:-      (a) in  any place  of entertainment      other than that mentioned in clause      (b).      (I) within  the limits  of a  local      area, the  population of  which  as      ascertained at  the last  preceding      census and  notified by  the  State      Government in  the official gazette      after  such  census  is  more  than      1,00,000, two  rupees per  seat  in      such place of entertainment:      (II) within  the limits  of a local      area, the  population of  which was      ascertained at  the last  preceding      census and  notified by  the  State      Government in  the official gazette      after  such  census  is  more  than      50,000 but  not more than 1,00,000,      on rupee  per seat in such place of      entertainment.      (III) in  any other  area,  seventy      paise per  seat in  such  place  of      entertainment.      (b) in any omnibus which is used to      the State  exclusively as  contract      carriage   having   provision   for      entertainment  by   video  cassette      recorder or  video cassette  player      on television  or  videoscope,  two

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    rupees per seat in the omnibus.      (2) For  the purpose of levy of tax      under this  section,  it  shall  be      presumed that      (a) in  the  case  of  a  place  of      entertainment falling  under clause      (a)   of    sub-section   (1),    a      proprietor provides  at least three      entertainments on every day, and      (b) in  the  case  of  any  omnibus      falling under  clause (b)  of  sub-      section (1),  a proprietor provides      at least one entertainment on every      day;      unless  the   proprietor  otherwise      informs the  prescribed officer  at      such time and in such manner as may      be prescribed.      3(a)    Notwithstanding    anything      contained in clause (a) of sub-sec.      (I), every  proprietor to  whom any      of the  provisions of  that  clause      apply  shall   have  an  option  of      payment  of   tax   a   the   rates      specified  in   clause  (d)  to  be      exercise as  provided in clause (b)      within ninety days from the date of      the  commencement  of  the  Gujarat      Entertainments Tax (Amendment) Act,      1984 and any person who become such      proprietor  after   that  date  may      exercise such  option within  sixty      days from such date.      (b)  A   proprietor   desiring   to      exercise an  option referred  to in      clause   (a)    shall    make    an      application   to   the   prescribed      officer in  such  form  as  may  be      prescribed, to  permit him  to make      in lieu of amount of tax payable by      him under clause (a) of sub-section      (I), payment  of tax  at the  rates      specified in clause (d).      (c) On  an application under clause      (b),  the  prescribed  officer  may      grant such permission and thereupon      subject to  clause (e)  the payment      of tax shall be made accordingly.      (d) where  a  proprietor  has  been      permitted to  pay tax  under clause      (c)  he  shall  be  liable  to  pay      monthly  at  the  following  rates,      namely:-      In  the   case  of   a   place   of      entertainment  within   the   local      limits of  a local area referred to      -      (1) in sub clause (I) of clause (a)      of sub-section (1) -      (i) five  rupees per  seat per  day      where the  proprietor has  declared      that he  holds not  more than three      entertainments per day; and      (ii) six  rupees per  seat per  day      where the  proprietor has  declared

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    that  he   holds  more  than  three      entertainments per day;      (2) in  sub-clause (II)  of  clause      (a) of sub-section (1)      (i) three  rupees per  seat per day      where the  proprietor has  declared      that he  holds not  more than three      entertainments per day; and      (ii) four  rupees per  seat per day      where the  proprietor has  declared      that  he   holds  more  than  three      entertainments per day,      (e) A  proprietor who has opted for      payment of  tax under  clause  (a),      may at  any time but not before the      expiry  of   a  period   of  twelve      months, by a notice in such form as      may be prescribed, addressed to the      prescribed  officer,   revoke   his      option from the commencement of any      month following  that in  which the      notice is given.      (4) For  the purpose of levy of tax      under   sub-section    (1)    every      proprietor   shall   furnish   such      returns to  the prescribed  officer      in such  manner or  such period and      before  such   date   as   may   be      prescribed.      (5) Save  as otherwise  provided in      sub-sections  (1)   to   (4),   the      provisions  of   this  Act  (except      sections 3,  4 and 6) and the rules      made thereunder  shall, so  far  as      may be,  apply in  relation to  the      tax livable  under sub-section  (1)      as they  apply in  relation to  the      tax livable under sections 3 and 4;      Rules 13  and  19  of  the  Gujarat      Cinemas (Regulations  of Exhibition      by  Video)  Rules,  1984  are  also      impugned  here.   They   are   also      reproduced herein-below:-      13. Power  to refuse  license:  (1)      The Licensing  authority shall have      absolute  discretion  to  refuse  a      licence  if  the  video  cinema  is      likely   to    cause   obstruction,      inconvenience,   annoyance,   risk,      danger or  damage to  the residents      or passers  by in  the vicinity  of      the cinema.      (2) The  licensing authority  shall      refuse a  license if  the  distance      between  the   existing   permanent      semi-permanent  or  touring  cinema      and the  video cinema  is less than      150 metres.      19. Access  to inspecting officers,      The licensee shall give free access      to the  video cinema  at all honors      to -      (i) the  licensing authority or any      officer nominated  by the licensing      authority under  the  Act  and  the

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    Rules and  for  checking  that  the      provisions of the Act and the Rules      are being complied with;      (ii)  any  Police  Officer  who  is      required by  a general  or  special      order of the licensing authority of      the  District   Superintendent   of      Police  or   the  Commissioner   of      Police, as the case may be."      Shri Krishan Mahajan, learned counsel appearing for the respondents, contends  that Section  3 of  the Act envisages levy of  the tax  on payment for admission to entertainments on every  payment for  admission to  an entertainment, other than the  payment for admission referred to in clause (b), a tax at  the following  rates specified  therein.  The  Video Recorder or a Player when exhibited entertains the customer; it does  not entertain a person on admission. For admission, therefore, it  is not  an entertainment  tax. Accordingly it cannot be  levied. We find no force in the contention. It is an admitted  position that  they entertain  the  persons  on playing the Video Recorder or Video Games on admission or in the omnibus, as enacted under the Act. Thereby, obviously on charging the  admission rates or while operating the omnibus during journey,  the Video Recorder or Video Player has been exhibited for  entertaining traveling passengers. Thus it is an admission  to entertain the person on payment. It is then contended that  the composition was not available to them at flat rate  because there is no regular intake of the persons or of  number of  shows. Accordingly, the rule is arbitrary. We find no force in the contention.      It is  seen that  the Rule  envisages imposition of the levy of  the tax on the basis of the population of the place of exhibition.  If it is a place where the population is one lakh and  more @  Rs.2/- per  seat and  if the population is between one  lakh and  50,000, @ Re. 1 per seat and in other places at  Re.0.75 per  seat. It  is  for  the  licensee  to specify  to   the  authorities,   how   many   persons   are entertained. As  far as the gross collections are concerned, it cannot be investigated to recall by a rule as to how many of them in each show are admitted. Sub-section 3(2) provides that for  the purpose  of levy of tax under this section, it shall  be   presumed  that   in  the  case  of  a  place  of entertainment failing under clause (a) of sub-section (1), a proprietor provides  at least  three entertainments on every day and  in the case of any omnibus failing under clause (b) of sub-section  (1), a  proprietor  provides  at  least  one entertainment  on  every  day.  It  is  only  a  presumptive evidence since in the absence of definite information, Rule- making authority  leaves it  to the licensee to establish by making application  as to  how  many  persons  he  has  been entertaining, unless  the proprietor  otherwise informs  the prescribed officer at such time and in such manner as may be prescribed. Therefore,  the proprietor  or the  licensee has been given option to inform the prescribed authority at such time and  in such  manner, as  the case  may be,  as per the rules. Sub-section  3(d) postulates  that where a proprietor has been  permitted to pay tax under clause (c), he shall be liable to  pay monthly  at the  rates specified  thereunder. Clause (e) shows that a proprietor who has opted for payment of tax  under clause (a), may at any time but not before the expiry of a period of 12 months, by a notice in such form as may be  prescribed, addressed  to  the  prescribed  officer, revoke  his  option  from  the  commencement  of  any  month following that in which the notice is given.      Thus it  could be seen that he has been given an option

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for payment of the entertainment tax in the manner laid down in Clause  (b). Under Clause 3(a), he is required to make an application as  provided under  clause (e). Thus considered, it  is   a  valid   rule  for  the  due  collection  of  the entertainment  tax   when  the   proprietor  of  the  video- recorder/video games  entertains the  persons admitted  into the theater  or exhibits  the video recorder/video player in omnibus at  the rates specified thereunder. Thus the Rule is valid and  is  not  beset  with  any  arbitrariness  in  the exercise of  the power.  Accordingly, we  uphold Section 6-A and affirm  the findings  of the  High Court  declaring Rule 13(2) to  be ultra  vires. Rule  22 is  void. Rule  14(2) is incidental to and consequence of enforcement of regulation.      The appeals are accordingly allowed, the writ petitions stand dismissed. No costs.